The Economy 101: Don't Believe Everything You Read

In his Jan 9 op ed column in the Washington Post, Sebastian Mallaby dismisses Democrats' claims that there is a huge problem with the economy (generally, the complaint is that economic gains have gone to corporations and not workers, that wages haven't improved as productivity has increased and as the stock market has gotten stronger, that job insecurity is increasing and the quality of new jobs is decreasing.). Mallaby writes:

It's true that wages have done badly. But in five of the past six
years, average compensation -- that is, wages plus benefits -- has
risen faster than inflation, according to the Labor Department's
Employment Cost Index. The exception was last year, and that was mainly
because high oil prices caused an unexpected inflationary spurt.

Just to be clear - he's saying that the fact that wages have done badly is misleading because wages plus benefits have done well. But here's the kicker. Benefits includes health care. And since at least 1999, health care costs have increased at two to three times the rate of inflation. With no increased value delivered. So it's a bit much to claim workers are doing better because the cost of their benefits has gone up so dramatically while their wages remain flat. The income generated by workers has not kept pace with inflation. That's the bottom line.

Later in the column, Mallaby dismisses claims that workers face more pressure by citing a paper on manufacturing firms. He then extrapolates out that what holds true for manufacturing firms holds true for every industry. If Mallaby can extrapolate to all companies based on the policies of
manufacturing companies, I can surely extrapolate to all workers based
on the ones I know. Right? Well then, I'm here to tell you that there's pressure on workers - and lots of it.

In dismissing increased pressure at work as implausible and wrong, Mallaby disregards the role (or not) of unions, the pressure faced by salaried workers to put in whatever time necessary to get the job done, the pressure faced by hourly workers to get more done in less time - or else. Pressure comes from the constant need to do more with fewer people, faster and better. Pressure doesn't come only or even mostly from company policies (child care, vacation, et al) and pressure isn't equivalent to "treating workers badly", as he implies. Oft times, pressure is external to the company and felt by executives and mail room clerks alike. And it's the inevitable result of the stock market's predictable upswing for companies that downsize - or "rightsize" as my my former employer liked to call it. When downsizing happens, the pressure is felt in the board room first, and then it doesn't just trickle down, it comes crashing down in a flash flood.

Mallaby moves on to prescriptions for our alleged economic challenges and implies that some Democratss support trade protectionism (when in reality we simply don't support free trade like that embodied in CAFTA). He goes on to say that we believe dampening competition will lead to gentler management (who said that?!?). Then he tells us not to worry about the middle class squeeze - that it's exaggerated. Huh. Tell that the the middle class in question. They might beg to differ.

Mallaby begins to redeem himself at the very end of his column - noting that the Bush tax cuts have "put the federal government on an unsustainable footing" and slamming the administration/Congress for running such a large budget deficit.

He then calls attention to the squeeze on the unskilled. And I have a question. First, I know that skill increases your opportunities, that you have a better chance at a better job at a better salary if you're "skilled". But I also know that our economy is shifting to a service economy and that one of the big complaints is that jobs requiring a skill are decreasing while service jobs are increasing, and that service jobs require less skill and therefore are compensated at a lower rate. So is there a squeeze on the unskilled in terms of the job market? Or is it the nature of a service-based economy that there will be more low-end unsatisfying jobs to be filled by the unskilled? On this point, I'm confused.

The bottom line is that the economy is improving for some people and not for others. It's improving for those with membership cards to the Ownership Society. It's not improving for those who don't have the assets to qualify for membership. There's a growing two-tier system in this country, a systematic division of have's and have not's. Those in the "have's" category are members of the Ownerhsip Society. Those "have not's" work to serve them. There isn't equal opportunity to join the ownership society - whether the asset owned is a good job, healthcare, stock, retirement accounts, private school, a college education, or basic economic opportunity, it's simply not available to everyone equally - it's not a level playing field. Not by a wide margin. Bush's tax cuts are just a part of the problem. But they should be the first to go. Then we'll move on the next challenge.

I also know that our economy is shifting to a service economy and that one of the big complaints is that jobs requiring a skill are decreasing while service jobs are increasing, and that service jobs require less skill and therefore are compensated at a lower rate.